Macron and Renault boss in high-stakes game

A long-simmering disagreement between the French economy minister and one of the country’s most celebrated CEOs escalated this week into an all-out battle for control of a French industrial giant.

Carlos Ghosn, the chairman and chief executive of Renault, is resisting an attempt by Economy Minister Emmanuel Macron to increase the state’s influence in France’s second-largest automobile company. Ghosn has enrolled the support of an interested third party, Japanese carmaker Nissan -- a Renault affiliate since 1999.

Until this week the row had been confined to behind-the-scenes arm-wrestling, double-entendre interviews and leaks to the financial media. But it burst into the open Thursday night when a group of 10 independent Renault board members — including Cherie Blair, the wife of the former U.K. prime minister — came out with a statement in support of Ghosn.

It was a move rarely seen at a French company, especially one in which the state holds a significant stake.

The dispute started in April after the French government increased its stake in Renault from 15 percent to nearly 20 percent, in order to block the company’s attempt to opt out from a new law allowing double-voting rights for long-term shareholders.

Ghosn and Renault’s board unsuccessfully opposed the government, on the argument that double-voting rights would irk Nissan. The French group owns 43 percent of its Japanese affiliate. Nissan in turn holds a 15 percent stake in Renault. But those shares do not have voting rights, under a French law that prohibits a “controlled” company from having voting shares in the parent firm.

Macron, an investment banker at Rothschild before he went into politics in 2012 as deputy chief of staff to President François Hollande, originally devised the ploy to counter Ghosn's opposition, but he promised then that the government would sell back the extra stake after the shareholders vote.

The bad news is that Renault shares tanked 37 percent between their high in May and the end of September, partly — but not only — because of fallout from the Volkswagen scandal. At their lowest price, the state would have booked a €500 million loss if it had sold the shares.

That would have been quite a loss for five months’ work, especially for a cash-strapped government.

Ghosn then seemed worried the government might keep the extra shares after all. The Nissan representative on Renault’s board, according to Reuters, started circulating a paper suggesting radical changes in the 16-year-old alliance, based on an increase of Nissan’s stake in Renault and corresponding decrease of the French group’s stake, below the 40 percent limit defining “control” in French law.

Macron’s answer: No way, Carlos.

The economy minister counter-attacked in a Les Echos interview, saying now was not the time to consider changing the terms of the 1999 deal — but suggesting that a full-blown merger between the two companies might have the favor of the French government.

The direct influence of the French state might be diluted in such a scheme, but Paris could seek written assurances beforehand that factories or research centers would stay in France, said a government adviser.

A Macron spokesperson declined to comment on the government’s ideas for Renault.

Reuters reported earlier this week that Ghosn had refused to set up a joint working group between the carmaker and the government to discuss Macron’s plans.

That’s when the independent directors stepped up to support their chairman, and reiterate their opposition to double voting rights, deemed “a destabilizing factor” for the alliance.

The question of whether to opt out of the law will come to shareholders again in April 2016, reinforcing Ghosn’s worries that the French government is in for the long haul.

The Renault chief has options he can pursue against the government, having the nominal votes to do so and the legal right to do it. He could, for example, sell down part of the French group's stake in Nissan to take it below the 40 percent threshold, thus automatically giving the Japanese firm voting rights.

The Renault board was scheduled to meet Friday night.

“Ghosn can push and push but can he really afford to screw Macron?” the adviser asked rhetorically. “He should remember that a French government can do a lot of harm to a company and meddle badly without even owning a major stake in it.”

In case of a showdown, Macron could even use the opportunity to burnish his so-far weak credentials with the Socialist party’s left. “Being the one to insist on keeping Renault French, and within reasonable state control, will be a political winner,” the official said.

Until its privatization started in 1996, Renault was considered a citadel of the communist-dominated Confederation Generale du Travail (CGT), then France’s largest union. The company was even deemed the French “social display window” for its emphasis on workers’ benefits and privileges.

The conflict is unique in that it involves two highly atypical figures in the French political and corporate world.

Macron, 37, is an outspoken advocate of the kind of free-market structural reforms that governments right or left have long shied away from, and he makes a point of not meddling in industrial affairs. He was chosen by Hollande to head the economy ministry in sharp contrast to his predecessor Arnaud Montebourg, who was criticized for his heavy-handed approach to government-inspired industrial policy.

Ghosn, a 61-year old Frenchman born in Brazil of Lebanese parents, has long cut an unlikely figure in corporate circles. He became a corporate hero in Japan after rescuing Nissan in the years after the Renault tie-up, to the point that his life became the subject of a manga comic book. In 2005, when he was appointed Renault chief executive on top of his Japanese duties, he was the first person to ever run simultaneously two Fortune Global 500 companies.

The French government’s stake had never seemed a problem for Ghosn or his predecessor, even when it topped 40 percent at the time of the tie-up. State meddling obviously didn’t increase as governments sold down the stake over the years.

It would be even more ironic if it suddenly became a source of conflict, in a moment when the government doesn’t have any objection to Renault’s industrial strategy.